Organization for Innovation

Organization for Innovation

Table 14.3 illustrates the most common form of organization for new­product development; product managers, new­product managers, new­product commit­ tees/departments and venture teams.

The organizational format used in a new­product development project can influence the time taken to complete the project. As suggested in Marketing Highlight 14.3, multidiseiplinary teams and a concurrent approach to handling new­product process activities have been the main driving force behind fast­ paced innovation.

Rut successful new­product development is not just about having a special organizational structure for new­product development. An innovative organiz­ ation must have, at its helm, top management thai gives priority to new products, which are seen as the life blood of the company. Their ­vision for innovation is clearly communicated to, and its value shared by, staff at all levels of the organ­

ization. A clear strategy as guiding force, backed by top management support, ensures that teams consistently perform. Top management not only believes wholeheartedly in, but also devotes sufficient resources to new­product develop­ ment. A strongly innovative organization is also committed to its people (staff), investing continually in helping them to acquire and maintain the necessary skills for innovation. The organization must also embrace the product cham­

pions who, against all the odds, strive to take 1 projects to completion. They, in

turn, rely on the executive champion, whose authority is invaluable in fighting off the political battles that interfere with new­product progress. Furthermore, infor­ mation and communication systems are designed to facilitate learning and to ensure that information flows quickly to critical individuals responsible for making or implementing new­product development decisions. Real innovation is

a risky activity, so firms must foster an entrepreneurial culture and climate for

626 • Chapter 14 Product Development and Life­Cycle Strategies

Table 14.3

Ways companies organize for new­product development

Product managers Many companies assign responsibility for new­product ideas to their product managers. Because

these managers arc close to the market and competition, they are ideally situated to find and develop new­product opportunities. In practice, however, this system has several faults. Product managers are usually so busy managing their product lines that they give little thought to new products other than brand modifications or extensions. They also lack the specific skills and knowledge needed to evaluate and develop new products.

New­product managers

Some companies have new­product managers who report to group product managers. This position 'professionalizes' the new­product function. On the other hand, new­product managers tend to think in terms of product modifications and line extensions limited to their current product and markets.

New­product committees

Most companies have ­A high­level management committee charged with reviewing and approving new­product proposals. It usually consists of representatives from marketing, manufacttiring,

finance, engineering and other departments. Its function is not developing or co­ordinating new products so much as reviewing and approving new­product plans.

New­product departments Large companies often establish a new­product department headed by a manager who has substantial authority and access to top management. The department's chief responsibilities include generating and screening new ideas, working with the R & I) department, and carrying out field testing and commercialization.

New­product venture teams

A more free­standing approach involves assigning major new­product development work to venture teams. A venture team is a group brought together from various operating departments and charged with developing a specific product or business. Team members are relieved of their other duties, and given a budget and a time frame. In some eases, this team stays with the product long

after it is successfully introduced.

innovation, with planning, control and reward systems encouraging risk­taking as opposed to its avoidance. Last, but, not least, to innovate effectively, firms must

build customer­foe used, functionally integrated organizations. In successful inno­ vative firms, new­product development is seldom left to chance. There may be an element of luck underpinning successful commercialization of innovations. Luck, unfortunately, is not easy to replicate. The lessons of strategic new­product plan­

ning and implementation, however, are, 22

We have looked at the problem of finding and developing new products. Next, let us examine the problem of managing them over their life cycle.

Product Life­Cycle Strategies

After launching the new product, management wants the product to enjoy .along and healthy life. Although it does not expect the product to sell for ever, the

Product Life­Cycle Strategics • 627

Time

Product develop­

frttroduction Growth Maturity

n vestment

Figure 14.2

Sales and profits over the product's fife from inception to demise

company wants to earn a decent profit to cover all the effort and risk that went into launching it. Management is aware that each product will have a life cycle, although the exact shape and length is not known in advance.

Figure 14.2 shows a typical product life cycle (PLC), the course that a product life cycle (PLC) products sales and profits take over its lifetime. The .product life cycle has five

The course of a product's distinct stages:

sales and profits over its lifetime. It involves five

1. Produce development begins when the company finds and develops a new­product distinct stages: product idea. During product development, sales are zero and the company's investment

development, costs mount.

introduction, growth, maturity and decline.

2. Introduction is a period of slow sales growth as the product is being introduced in the market, Profits are non­existent in this stage because of the heavy expenses of product introduction.

3. Growth is a period of rapid market acceptance and increasing profits.

4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.

5. Decline is the period when sales fall off and profits drop. Not all products follow this S­shaped product life cycle. Home products are intro­

duced and die quickly; others stay in the mature stage for a long, long time. Some enter the decline stage and are then cycled back into the growth stage through strong promotion or repositioning.

The PLC concept can describe a product class (petrol­engined ears), a product form (coupe) or a brand (the BMW 325is). The PLC concept applies differently in each case. Product classes have the longest life cycles. The sales of

many product classes stay in the mature stage for a King time. Product forms, in contrast, tend to have the standard PLC shape. Product forms such as 'cream deodorants', the 'dial telephone' and 'phonograph records' passed through a regular history of introductions, rapid growth, maturity and decline. A specific brand's life cycle can change quickly because of changing competitive attacks and responses. For example, although teeth­cleaning products (product class) and

628 • Chapter 14 Product Development and Life­Cycle Strategics

Figure 14.3 Marketers need to understand and predict style, fashion and fad

toothpaste (product form) have enjoyed fairly long life cycles, the life cycles of specific brands have tended to be much shorter.

The PLC concept can also be applied to what arc known as styles, fashions and

style

fads. Their special life cycles are shown in Figure 14.3. A style is a basic and distinc­

A basic and distinctive tive mode of expression. For example, styles appear in British homes (Edwardian, mode of expression.

Victorian, Georgian); clothing (formal, casual); and art (realistic, surrealistic, abstract). Once a style is invented, it may last for generations, coining in and out of vogue. A style has a cycle showing several periods of renewed interest.

fashion

A fashion is a currently accepted or popular style in a given field. For

A currently accepted or example, the 'preppie look' in the clothing of the late 1970s and 1980s gave way to popular style in a given

the loose and layered' look of the 1990s. Fashions pass through many stages. field.

First, a small number of consumers typically take an interest in something new that sets them apart. Then other consumers take an interest out of a desire to copy the fashion leaders. Next, the fashion becomes popular and is adopted by the mass market. Finally, die fashion fades away as consumers start moving towards other fashions that are beginning to catch their eye. Thus fashions tend to grow slowly, remain popular for a while, then decline slowly.

fads Fads are fashions that enter quickly, are adopted with great zeal, peak early and Pasftiona chat enter

decline very fast. They last only a short time ynd tend to attract only a limited quickly, are adopted

following. Fads often have a novel or quirky nature, as when people start buying with great %eal, peak

Rubik's cubes, 'pet rocks' or yoyos. Fads appeal to people who are looking for early and decline vary

excitement, a way to set themselves apart or something to talk about to others. fast.

Fads do not survive for long because they normally do not satisfy a strong or

lasting need or satisfy it well. 21

The PLC concept can be applied by marketers as a useful framework lor describing how products and markets work. But using the PLG concept tor fore­

casting product performance or for developing marketing strategies presents some practical problems. 2 ' 1 For example, managers may have trouble identifying which stage of the PLC the product is in, pinpointing when the product moves into the next stage and determining the factors (hat affect the product's movement through [lie stages. In practice, it is difficult to forecast the sales level at each PLC stage, the length

of each stage and the shape of the PLC curve.

Using the PLC concept to develop marketing strategy can also be difficult because strategy is both a cause and a result of the product's life cycle. The product's current PLC position suggests the best marketing strategies, and the resulting marketing strategies affect product performance in later life­cycle stages. Yet when used carefully, the PLC concept can help in developing good marketing strategics for different stages in the product life cycle.

Product Life­Cycle Strategies • 629

We looked at the product development stage of the product life cycle in the first part of the chapter. Now let us look at strategies for each of the other life­ cycle stages.